Consumer debt relief in South Africa : should the insolvency system provide for NINA debtors? : lessons from New Zealand

Abstract:

South African natural person insolvency law has remained largely creditor-orientated
despite the international trend to assist over-indebted debtors. Furthermore, although the
South African system provides for a number of debt relief procedures, the entry requirements
are of such a nature that most debtors are effectively excluded from any
form of relief and therefore bound to their desperate situations. The majority of these
excluded debtors fall within the no income and no assets (the so-called No Income No Asset (NINA) debtors) category-the main feature of this article. In the South African
insolvency system, a person can therefore be ‘too poor to go bankrupt’. With reference
to international principles and a thorough comparative study of the New Zealand system,
the South African system is analysed, and some recommendations are made in order
to provide a more accessible, effective and nondiscriminate system with specific
focus on the plight of the NINA debtor. This is done by keeping the complex South African
debt and poverty situation in mind as it is acknowledged that any reform should
take cognisance of the unique socio-economic and cultural background. It is recognised
that providing relief to the NINA category debtors will have an impact on the economy.
However, it is submitted that the exclusion of this group will be even more expensive as
it creates an obstacle for these debtors to enter the formal sector and economy, thereby
discouraging broader economic growth.